" This blog is a integrated approach towards tracking the Indian power sectorwhich is evolving, having a great potential with prosperous future."

ALL INDIA INSTALLED CAPACITY

Friday, September 2, 2011

PFC to restart process for award of UMPPs in Orissa, Tamil Nadu

Cheyyur plant to be bid out in September and request for proposals for Orissa project to be called for in October

The stalled process for awarding ultra-mega power projects (UMPPs) could soon be back on track, with Power Finance Corp. Ltd (PFC), the nodal agency for awarding the projects, planning to bid out the Cheyyur project in September and proceed to the second stage of bidding for an Orissa plant in October.

“We plan to issue the requests for qualification (for) Cheyyur in September,” said Satnam Singh, chairman and managing director, PFC.

A request for qualification (RFQ) indicates a company’s intention to compete for a project. After shortlisting from among the companies that submit RFQs, requests for proposals (RFPs) are called for.

All clearances for the coal-based project in Cheyyur, Tamil Nadu, are in place except environmental clearance for a port that will be used to bring in imported coal. The district administration has cleared the port, and an approval is awaited from the state government. Once that is done, the Union government will have to give its approval.

Analysts are not enthused.

“While it is good to know that the Cheyyur bids will be called next month, the real question is the coal availability,” said Amol Kotwal, deputy director of energy and power systems practice for South Asia and West Asia at Frost and Sullivan. “Where is it going to come from, given the fact that there is volatility in the prices due to the changing policies of the coal exporting nations?”

The Cheyyur project will rely on imported coal, whose price, including freight charges, is prone to fluctuations. It will, thus, be crucial for companies to secure coal supplies to bid for the project, as movement in international coal prices could impact input costs.

UMPPs follow competitive tariff-based bidding, and special purpose vehicles (SPVs) are set up to reduce risk perception and to increase investor confidence. These SPVs take care of regulatory requirements such as land acquisition and environmental clearance, and transfer these to the winning bidder. Each 4,000 megawatts (MW) project requires an investment of around Rs.20,000 crore.

The UMPP programme has been weighed by ecological concerns and local resistance. The much-delayed process is back on track with the Orissa project set to be awarded next.

The environment ministry in June opened for mining six coal blocks in the state that earlier fell under its so-called “no go” areas, paving the way for the award of the project.

The environment and coal ministries announced the concept of “go” and “no go” areas for coal mining in 2009 to protect India’s best forests.

PFC, which is evaluating RFQs for the Bedabahal UMPP in Orissa, plans to invite RFPs for the project in a couple of months. The coalpit head project has got responses from 22 companies.

“The bids are being evaluated, and once the companies are shortlisted, we plan to issue RFP in October,” said Singh.

As for the UMPP in Chhattisgarh, the last date for submitting RFQs is likely to be extended again, he added. The present deadline for RFQs for the Surguja UMPP in Chhattisgarh is 5 September.

PFC has so far extended deadlines for companies to respond to RFQs for the Orissa and Chhattisgarh projects seven and six times, respectively.

The government wants to set up 16 UMPPs to meet the energy needs of the world’s second fastest growing major economy after China. India has a power generation capacity of 180,000MW and expects to add 62,374MW by 2012.

Nine UMPPs were originally planned, but only four have been awarded—at Mundra in Gujarat, Sasan in Madhya Pradesh, Krishnapatnam in Andhra Pradesh, and Tilaiya in Jharkhand. Two projects, at Girye in Maharashtra and Tadri in Karnataka, were abandoned due to local resistance